News 8 reported on Malouf's lavish homes and two multimillion dollar corporate jets. Malouf did not admit any wrongdoing or liability in his settlement.

He is one of several orthodontists highlighted for multimillion dollar billings under Medicaid.

Eleven dental operations statewide have had their state funds suspended for credible allegations of fraud in billing the Texas Medicaid Orthodontics program. This follows a 10-month News 8 investigation of medicaid orthodontics in Texas, which found the state spends more on braces for poor children than the rest of the nation combined.

"Something's wrong and I want my money back," said Texas Sen. Jane Nelson (R-Flower Mound). Nelson called a hearing to look into how Texas spent $424 million on orthodontics under Medicaid between 2008 and 2010.

Medicaid does not cover cosmetic orthodontics, but a News 8 investigation found that tens of thousands of children received procedures at taxpayer expense.

"What we really want is, we don't want people to do it," said Texas Sen. Bob Duell (R-Rockwall).

State Medicaid Director Billy Millwee told the panel there are now procedures in place to solve the problem — most notably managed dental care, which is now using health maintenance organizations (HMOs) to oversee the ongoing treatment of individual children.

As of March 1, dentists are reimbursed per patient rather than by individual procedures performed on each patient. Plans for the program have been in place for some time.

State investigators found that over the last four years, dentists — paid by-the-procedure under the Medicaid dental program — were seeing their patients nearly twice as many times per year as private dentists.

Orthodontists paid by Medicaid saw their patients 22 times per year under, versus 12 times a year for private dentists.

"Can the state get that money back?" asked Sen. Royce West (D-Dallas).

The state puts some of the blame on TMHP, the Texas Medicaid and Healthcare Partnership, which oversees reimbursement. Until last fall, the claims for tens of thousands of children were approved by just one dentist.

After News 8's investigation, he left the program and has been replaced by five dentists.

Dentists now submitting claims under Medicaid orthodontics must now include a mold of the child's mouth. This requirement was omitted in 2009.

"We're probably at fault because of our policies," Texas Health and Human Services commissioner Thomas Suehs told the panel. "The orthodontists appeared to be manipulating the system."

"There was no one checking to see if those services were medically necessary," Sen. Nelson added.

Under a rule called Credible Allegation of Fraud (CAF), which lets the state suspend payments to a Medicaid provider, Texas is investigating 11 dental operations across the state.

In evaluating their billings, the state has found an "error rate" of 90 percent in their diagnoses, based on the evidence they submitted with their claims, said Douglas Wilson, who is the inspector general for the Texas Department of Health and Human Services.

"When I see these things in the media, it causes me great angst that we weren't on the front end of the process," Wilson said.

Last month, News 8 reported that dental recruiters are patrolling the parking lots of food stamp offices, enticing mothers to take their children to certain dentists under Medicaid by offering free gift cards.

Millwee called them "headhunters."

"It's illegal, unethical, and it's a behavior we want to see stopped right now," he said.

The inspector general said the state and federal governments have launched 31 active orthodontic investigations.

The state has three avenues for redress from dentists found to have abused the system:

Pursue remuneration from TMHP in cases where claims were incorrectly allowed

Pursue the dentists for repayment of incorrect claims

Take criminal action if fraud was committed.

Inspector General Wilson says even if improper claims were approved, the Medicaid dentists who made them are not off the hook. "The dental professional absolutely had a responsibility to only provide those services that were needed to the kids of Texas," he said.